How to Prevent Identity Theft: A Step-by-Step Guide

6 second take: Identity theft is scary, but a little prevention can help spot it before it gets out of control. Here's how you can protect yourself from identity theft.

A few years ago, I noticed a fraudulent charge on my credit card. I notified my credit card company, and they took care of it. I thought I was simply a victim of credit card fraud.

A few days later, I logged in to that same credit card account and saw a pending balance transfer for more than $3,000.

To say I was a bit freaked out would be an understatement. How could this happen? My credit card company should have been on high alert after the last fraudulent transaction. I’d even had a new card issued to make this type of thing even more difficult to happen again.

After calling my credit card company a second time, I managed to get the fraudulent balance transfer stopped. Unfortunately, what I learned from my company was even scarier.

I asked how on Earth someone could initiate a balance transfer without my permission. The representative explained that the company thought it was me who had called. The caller had given my Social Security number (SSN) to my credit card company to verify my identity. Scary.

What Is Identity Theft, Exactly?

Identity theft is when a fraudster acquires your personal identifying information and uses it for their financial gain. I now considered the balance transfer was now identity theft.

Sadly, I’m not alone. According to a Bankrate survey, 41 million adults in the United States have had their identity stolen. I now take extra steps to protect my identifying information whenever possible.

How to Prevent Identity Theft

1. Guard Your Identifying Information

When I visited doctor’s offices and other similar establishments in the past, I completed every form they asked me to fill out. These forms often ask for your SSN. After my experience with identity theft, I paused and wondered why doctor’s offices ask for that information.

I learned that they use your SSN to report your delinquent bills on your credit reports. Now I no longer give out my SSN to anyone who doesn’t actually need it. Instead, I just leave the line blank. If somebody requests that I fill it out, I ask why they need it. Most of the time, the party asking for my SSN will let the issue go.

2. Check Your Statements

Another way to prevent identity theft is to regularly check your financial statements. Make sure you recognize every transaction on your statements. If you don’t, contact your financial institution immediately. This is how I caught my credit card fraud and identity theft.

If you get your statements mailed to you, make sure that you actually receive them. Some thieves will steal these from your mailbox to help them commit fraud.

3. Check Your Credit Report

Simply checking your statements won’t prevent all identity theft. Criminals often open accounts in your name. If they don’t have statements mailed to you — which smart criminals won’t — you may never know about that account. It’s absolutely imperative that you check your credit report regularly.

You might also want to consider services, such as Identity Guard, to enroll in a plan that monitors your digital and financial identity. They offer a free 30-day trial, so it might be worth trying out.

Plus, you’re entitled to a free copy of your credit report once a year from each of the three major bureaus. You can get your report at AnnualCreditReport.com. You can also receive free credit reports in full from sites like Credit Karma, Credit Sesame (which also offers an identity theft protector), and MyFreeScoreNow.

Once you receive your credit report, look for new accounts that you don’t recognize. If you find any, contact the listed phone number and investigate.

4. Initiate a Credit Freeze

Thankfully, I’ve never had any unauthorized accounts opened. But if that does happen, it can be a real headache. If fraudsters can open one account, chances are they can open more.

The last and most effective of the ways to prevent identity theft is to put a freeze on your credit report. When you freeze your credit report, no new credit can be issued to you. You have to unfreeze your credit prior to applying for any new accounts, though, or you will be denied.

You’ll have to freeze your credit report separately at each of the three major credit bureaus — Equifax, Experian, and TransUnion. The price varies by state, but it usually ranges from costing just a few dollars to being free. You may also have to pay a fee to lift your credit freeze before applying for new credit, as well.

Identity Theft Is No Joke

I was lucky that my case of identity theft was very minor. Others aren’t so lucky. Cleaning up the results of a stolen identity takes a long time and can be a major headache. You should always regularly monitor your accounts and credit reports regardless of whether you think you’re at risk for identity theft.